Shares of American toy maker Mattel Inc. (MAT) dropped almost 7% on Thursday after the El Segundo, Calif.-based company announced plans to cut its dividend in half in order to fund its business transformation initiative. (See also: A Tale of Two Toy Makers: Mattel and Hasbro.)

The maker of Barbie and Hot Wheels cut its payout to $0.15 per share for the fiscal third quarter, down from $0.38 paid out in previous quarters, as its new Chief Executive Margo Georgiadis seeks funds to help the company modernize its brands for the digital age, push into new markets around the world and compete with rivals such as long-time U.S. competitor Hasbro Inc. (HAS).

Mattel stock has now lost 33.5% of its value in the last 12 months.

Following Hasbro’s Example

The struggling global toy maker, unable to revive interest in its core brands and slow to catch on to digital trends, had been paying out more in dividends than it was making in earnings. Chief Financial Officer Kevin Farr indicated the firm will move toward a dividend payout ratio of between 50% to 60% of earnings. Management estimates it will use $250 million to $350 million to support the turnaround strategy. Georgiadis has highlighted a series of “execution gaps” as the culprits for Mattel’s sales mishap, particularly its brand mismanagement, loss of a Disney Princess deal to Hasbro and an excessive focus on short-term financial metrics.

Like its peer, Hasbro, Mattel will move toward becoming more than just a toy company, transforming into a complete entertainment platform with live experiences, video content, gaming components and licensed goods. The new CEO plans to build out the company’s digital connected toy footprint in China, hoping to grow its share three to four times in the $31 billion Chinese toys and games market. Currently, Mattel ranks behind LEGO Group and Hasbro in China with only 2% of the total market. (See also: Hasbro a Buy on Strong Content and Leverage: Jefferies.)